Having scaled to the heady heights of £6.22 in mid-May, Royal Mail shares’ best price since launching back in 2013, the British institution fell off a cliff in the second half of 2018. Though it was in trouble before October’s profit warning, things accelerated after that point, eventually leaving it at an all-time low of £2.73 by the year’s end.
The stock hasn’t done a whole lot so far in 2019, its mild rebound lacking any real gusto. Royal Mail shares now sit at a current trading price of £2.99.
Following October’s aforementioned profit warning – one that saw the company reveal its cost savings would be just £100 million instead of the £230 million forecast – November’s half year report had a job to do getting investors back on board. It didn’t succeed.
The stock dropped another 7% as Royal Mail confirmed that revenue had risen 1% to £4.93 billion, with a 9% rise at GLS countered the 1% decline at UKPIL. UK parcel revenue and volumes rose 6%, but addressed letter volumes and total letter revenue were both down 7%. Adjusted operating profit before transformation costs, meanwhile, tumbled 25% to £242 million.
As it stands, Royal Mail is expecting adjusted Group operating profit before transformation costs for the year to come in between £500 million and £550 million; a further narrowing of that range could dictate the reaction on Tuesday. Of course it’s also the first update after Christmas, so investors will be keen to see whether the firm got any Santa-boost, or whether customers where particularly Scrooge-like over the holiday season.
Royal Mail shares have a consensus rating of ‘Hold’ alongside an average target price of £3.82.
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